The Commerce Department reported retail sales rose a mere 0.1 per cent in September, half the increase expected by analysts, and revised down August's reading to zero percent from a 0.2 per cent rise previously reported.

Stripping out sales of autos and gasoline, there was no growth in retail sales last month.

"Investors sold US dollars aggressively after this morning's abysmal US retail sales report," said Kathy Lien of BK Asset Management.

The dollar was broadly lower against other major currencies. The greenback fell to 118.88 yen from 119.72 late Tuesday, while the euro rose to US$1.1469 from US$1.1381.

Adding to the weak data was the Labour Department's inflation report that showed producer prices fell 0.5 per cent in September, the sharpest drop since January.

"With inflation falling and consumer spending stagnating, it will be very difficult for the Federal Reserve to pull the trigger this year," Ms Lien said of any rate increase.

The Fed has held its benchmark federal funds rate near zero since late 2008 to help support the economy's recovery from the worst recession since the 1930s.

Ms Lien said the economy could regain momentum in November or December but it would have to be a significant step-up to alter market expectations of a hike.

"The decline in the dollar reflects the growing belief that the first rate hike will be in 2016 and not 2015. Fed fund futures are now pricing in 29 per cent chance of a rate rise in December versus 35 per cent before the retail sales report," she said.